And whenever corporate debt rises to present levels, recession is in the air? at least for the past 40-odd years:

But whom shall we blame?

As is our wont, we point an accusing finger at the Federal Reserve?

Year upon year of ultra-low interest rates hammered borrowing costs lower and lower.

Marginal corporations that would have been denied access to credit under normal circumstances took on debt.

And many corporations have issued bonds to raise funds rather than issue stock. It has proved less expensive given the bargain rates.

Did corporations use the borrowed money to increase productivity? increase research and development? or expand operations?

No, not particularly.

Many corporations have been using the money to purchase their own stock, which has artificially inflated their prices.

And as we have stated before, corporations have been the largest source of all stock purchases.

But interest rates have been climbing… like water in a flooding basement.

And the cost of existing debt is rising with it.

How will they meet their debts?

Bonds rated ?BB? are considered ?junk bonds.?

?BBB? is one level removed from junk.

MarketWatch informs us that the volume of the bond market rated BBB currently rises to $2.5 trillion ? a record high.

That is, 50% percent of all investment-grade corporate bonds are presently one inch from junk status.

And once they start going over? watch out.

Explains Daily Reckoning associate John Mauldin:

This is the sort of thing that can quickly snowball into a financial crisis. Something similar happened with commercial paper in 2008, but this has the potential to be even worse? and, if it happens, could come at a time when the Federal Reserve and Treasury can't help much. I see serious risk of a corporate bond crisis in 2019?

Analyst Jesse Colombo is similarly alarmed:

The U.S. corporate debt bubble will likely burst due to tightening monetary conditions, including rising interest rates. Loose monetary conditions are what created the corporate debt bubble in the first place, so the ending of those conditions will end the corporate debt bubble. Falling corporate bond prices and higher corporate bond yields will cause stock buybacks to come to a screeching halt, which will also pop the stock market bubble, creating a downward spiral.

In conclusion:

There are extreme consequences from central bank market-meddling, and we are about to learn this lesson once again.